trends and innovation in the u.s. healthcare system
TRANSCRIPT
Trends and Innovation in
the U.S. Healthcare System
2018 Casualty Loss Reserve Seminar
Anaheim, California
September 6, 2018
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Speakers
Guy Avagliano
FCAS, MAAA
Principal &
Consulting Actuary
San Francisco
Moderator
Adam Blais
AIC, AIS
Claims Consultant
Boston
Co-Presenter
Andrew Naugle
MBA
Principal & Consultant
Seattle
Co-Presenter
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Learning Objectives
Understand the stakeholders underlying
the U.S. health insurance marketplace
Understand the impacts of U.S. healthcare reform
Learn about trends and innovations affecting the U.S. healthcare system
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OVERVIEW OF THE U.S.
HEALTHCARE SYSTEM
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U.S. Health Expenditures
1960
National Health Expenditure
$27.2B
% of GDP 5.0%
$/Person (today’s $) $146.24 ($1,143)
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U.S. Health Expenditures
1960 2016
National Health Expenditure
$27.2B $3,370B
% of GDP 5.0% 17.9%
$/Person (today’s $) $146.24 ($1,143) $10,539
Annual per-person spending in 2016 was
9 times what it was in 1960
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Types of Expenditures
Hospital CareProfessional
ServicesPrescription
DrugsNursing Care
Facilities
Personal Care Dental CareHome Health
CareOther Settings
Durable Medical
Equipment
Medical Supplies
OTC Drugs/ Supplies
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Scope and Scale
5,500 hospitals
14.4 million workers
895,000 physicians
2,900 mental health
facilities
895,000 hospital beds
15,900 nursing homes
2.7 million registered
nurses
9,000 urgent care centers
552,000 mental health professionals
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U.S. Health Expenditures
Hospital Care32%
Professional Services20%Nursing Services
5%
Prescription Drugs10%
Government administration
8%
Other health, residential, and personal care
5%
Other spending20%
Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group (2016)
By Type of Expenditure
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U.S. Health Expenditures
Hospital Care32%
Professional Services20%Nursing Services
5%
Prescription Drugs10%
Government administration
8%
Other health, residential, and personal care
5%
Other spending20%
Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group (2016)
By Type of Expenditure
Hospital and
professional
services ≈50%
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Growth by Expenditure Type
5.8
5.7
5.9
8.9
3.7
8.7
4.4
5.9
5.8
4.6
4.1
0 1 2 3 4 5 6 7 8 9 10
U.S. Health Expenditures
Hospital care
Professional services
Prescription drugs
Nursing care
Other health, residential, and personal care
Dental services
Other professional services
Home health care
Other nondurable medical products
Durable medical equipment
Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group (2015)12
Growth by Expenditure Type
5.8
5.7
5.9
8.9
3.7
8.7
4.4
5.9
5.8
4.6
4.1
0 1 2 3 4 5 6 7 8 9 10
U.S. Health Expenditures
Hospital care
Professional services
Prescription drugs
Nursing care
Other health, residential, and personal care
Dental services
Other professional services
Home health care
Other nondurable medical products
Durable medical equipment
Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group (2015)13
Sources of FundsSource of Funds Description
Private health insurance Employer groups, individual (incl. ACA)
Medicare Seniors and disabled
Medicaid Temporary assistance, children’s health
Other public sectorVeterans, military, Indian health, school health, public health, vocational rehabilitation
Out-of-pocket Self-pay, health savings accounts
Workers’ compensationFederal, state, and local payments for workers’ compensation-related medical payments
Other private sectorEmployer worksite, philanthropy, ancillary facility services
Financed through a combination of public
and private sources
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U.S. Health Expenditures
Source: National Health Expenditures, “Personal Health Care” by “Type of Expenditure” (2016)
By Source of Funds
Private Health Insurance, 33.7%
Medicare, 20.1%
Medicaid, 17.8%
Other Public, 12.2%
Out-of-Pocket, 10.6%
Other private, 4.2%
Workers' compensation,
1.5%
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U.S. Coverage Sources
Coverage Source 2013 2014 2015 2016
Private Health Insurance 187.6 192.8 196.3 196.4
Employer Sponsored 90% 88% 88% 88%
Individual 10% 12% 12% 12%
Medicaid 58.9 65.9 69.1 71.2
Medicare 51.3 52.8 54.3 55.8
Uninsured 44.2 35.5 29.5 28.6
Total 342.0 347.0 349.2 352.0
Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group (2016)
Uninsured moving into Medicaid (ACA expansion)
and the individual market (ACA exchange)
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U.S. Coverage Sources
Coverage Source 2013 2014 2015 2016
Private Health Insurance 187.6 192.8 196.3 196.4
Employer Sponsored 90% 88% 88% 88%
Individual 10% 12% 12% 12%
Medicaid 58.9 65.9 69.1 71.2
Medicare 51.3 52.8 54.3 55.8
Uninsured 44.2 35.5 29.5 28.6
Total 342.0 347.0 349.2 352.0
Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group (2016)
Uninsured moving into Medicaid (ACA expansion)
and the individual market (ACA exchange)
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WC Benefits Paid
Coverage Source 2013 2014 2015
Private Insured 55.2% 55.0% 54.9%
State Fund Insured 15.1% 14.7% 14.6%
Federal Insured 5.9% 5.9% 6.0%
Self-Insured 23.8% 24.4% 24.5%
Source: National Academy of Social Insurance, Workers’ Compensation: Benefits, Coverage, and Costs (October 2017)18
Share of GDP
Source: National Healthcare Expenditures Summary Including Share of GDP, CY 1960-2016. (2016)
0
2
4
6
8
10
12
14
16
18
20
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
19
Share of GDP
20
Share of GDP
Federal government and households each fund
about 28% of expenditures21
TRENDS AND INNOVATIONS
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Provider/Payer Convergence
• Providers see opportunity in controlling the premium
• Payers see opportunity in controlling the
delivery system
Payer ProviderPayer and
Provider
Distinction between “providers of care” and “financers of care” is blurring
as each invests in building or buying infrastructure of the other
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Industry Consolidation
Control the spectrum of
care delivery
Drive patient volume
Improve negotiating power
Create economies of scale
Build market share
Expand physical footprint
Both payers and providers are pursuing acquisition/ affiliation strategies that consolidate market power and improve economies of scale
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Employer Innovation
GM direct contract with Henry Ford
Health System
Walmart/ Geisinger bundled
payment arrangement
Boeing IOCP
A/BH/JPMC “disruption” venture
Employers are exploring new approaches to reduce costs through direct contracts with health systems and other innovations
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Optimized Provider Networks
Network is one of the
remaining cost control “levers”
Volume/price trade-off
Employers less resistant
to employee disruption
Focus on cost/quality/access
Limitations with some WC
requirements
Transitioning from broad networks that maximize access to “optimized” networks that balance cost, quality, and access
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Alternative Payment Models
Widespread acknowledgement that FFS is obsolete and rife with perverse
incentives (more services = more revenue)
Desire among payers to transition from FFS to VBR; desire among
providers to “take risk”
P&C insurers, analytical analysis becomes crucial for care providers
Value-based reimbursement continuum
Reimbursement is transitioning from fee-for-service to alternative arrangements, many of which transfer risk to the provider
FFS + Admin BonusFFS + Limited
Shared Savings
FFS or Capitation +
Shared Upside
Capitation + Shared Upside
Capitation + Shared Upside and Downside
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Portfolio Diversification
Payers are expanding their product portfolios
outside “traditional” health products…
Ancillary insurance products (dental, vision)
Supplemental insurance products (critical illness,
accident, disability)
Services for employers (HSA/FSA administration,
wellness, absenteeism management, on-site
clinics)
P&C industry, some employers providing virtual
doctors and telemedicine for remote worksite
injuries
Confidential and Proprietary
Margin pressure on traditional health products is driving product portfolio expansion into related insured and non-insured products
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Internet Devices
Payers deploying internet-connected
devices to collect information about
member behaviors and biometrics
Data are used in member engagement
and care management programs
Limited uptake in the WC market, but
auto insurers are making extensive use
of devices for telematics through phone,
tracking, and camera data
Confidential and Proprietary
Insurers are providing devices that collect personalized data for each insured
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Provider Targeting/Steerage
Provider directories offer little
differentiating information for
choosing a provider
Transparency initiatives provide
actionable information to help
consumers choose providers
based on quality and cost
In current P&C space what
makes a “better” choice is cost
or position driven
Transparency tools help consumers find the optimal provider based on their preferences and priorities
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New Rx Payment Models
Prescription drugs and individualized therapies have the potential to improve patient outcomes, but payers want risk protection
Curative therapies pipeline is growing; many of
these products have high prices
Payers are looking for ways to off-set the
up-front payment model (risk: benefit of the
therapy does not accrue to the payer that
funds the treatment)
Options under consideration: annuity
payments (with and w/out effectiveness
guarantees) and financial bonds provide risk
protection for payers while offering revenue
streams to pharmaceutical manufacturers
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Consumer Engagement
Engaging consumers in managing their own health
Few insurers claim engaged consumers; traditional
engagement techniques are reactive and transactional
(phone, email, chat)
Insurers are investing in enhancing consumer
engagement with emphasis on activities that reduce
expenses, increase stickiness, increase engagement
Different consumer cohorts engage with insurers in
different ways; requires retaining traditional methods
while supporting with new approaches
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Trends and Innovations
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Payer/Provider Convergence
Industry Consolidation
Employer Innovation
Optimized Provider Networks
Alternate Payment Methodologies
Portfolio Diversification
Internet Devices
Provider Targeting/Steerage
New Rx Payment Models
Consumer Engagement
Questions and Discussion